The cash and stock deal also nets PVH brands like Speedo andChaps to go along with its Tommy Hilfiger, IZOD and Van Heusenbrands.

PVH shares rose 20 percent on the deal, which is expected toadd to earnings as soon as it closes. Warnaco rose almost 39percent.

"The deal is fairly priced and the combination makes a lotof sense strategically," said Lauren Taylor Wolfe, managingdirector of Blue Harbour Group, which owns more than 3 percentof Warnaco's shares. She said there are other revenueopportunities from the combination that have not been includedin projections from PVH Chief Executive Emanuel Chirico and histeam.

The clothing manufacturing industry is seeing activeconsolidation, as bigger vendors buy up smaller players andlicensees to gain more control over their brands, find moreflexibility in operations and save money. VF Corp,another major player in the space, is known for constantlylooking at bolt-on deals to add to its portfolio.

PVH bought Calvin Klein in 2003 and makes formal andsportswear under that brand. Warnaco has held the licensingagreements for Calvin Klein jeans and underwear since 1997 andoperates around 1,760 Calvin Klein retail stores worldwide.

"I believe Manny will go forward and shareholders will getthe benefit of the top line as they make use of Warnaco'spresence in India and LatAm and also as he controls more of theCK brand. As he controls the brand, he also has an opportunityto think about retail expansion," Wolfe said.

"The heritage segment ... will be slow growing, but solidcash flow generators for PVH," he said.

Analysts at Piper Jaffray said the strong distributionplatform that Tommy Hilfiger has in Europe will be a positivefor CK jeans.

The combined business will have $8 billion in annualrevenue. PVH expected the acquisition to add 35 cents a share toearnings, excluding special items, in the first year and $1 inthe third year, when it forecasts annual savings of about $100million.

PVH said it now expected full-year earnings per share tocome in at the high end of its Oct. 2 outlook of $6.32 to $6.37per share excluding special items.

Based on PVH's closing price of $91.50 on Friday, the dealvalues Warnaco at $68.43 a share for a premium of 34 percent.

PVH shares jumped 20.2 percent to close at $109.99 on Wednesday, and shares of New York-based Warnaco surged 38.7percent to end at $70.58, both on the NYSE.

On a call with analysts, Chirico said the company would usethe deal to directly develop its Tommy Hilfiger brand inestablished Warnaco markets.

Companies often have to depend on third-party manufacturers,marketers and licensing agents to sell their brands ininternational markets, making it a costly and time takingprocess. Direct control allows them more flexibility and savesthem money.

PVH is paying $51.75 in cash and 0.1822 of a share of commonstock for each Warnaco share.

The deal value is based on Warnaco's 40.87 million sharesoutstanding as of Aug. 1.

Warnaco's Calvin Klein businesses will be run by Tom Murry,chief executive officer of Calvin Klein.

PVH, which competes with Ralph Lauren Corp, PerryEllis International Inc and Michael Kors Holdings Ltd, said it had commitments for $4.33 billion in financingfrom Barclays, BofA Merrill Lynch and CitigroupGlobal Markets Inc.